Section 9–103. Purchase-money Security Interest; Application of

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Payments; Burden of Establishing.

(a) Definitions. In this section:

(1) "purchase-money collateral" means goods or software that

secures a purchase-money obligation incurred with respect to

that collateral; and

(2) "purchase-money obligation" means an obligation of an obligor

incurred as all or part of the price of the collateral or for

value given to enable the debtor to acquire rights in or the

use of the collateral if the value is in fact so used.

(b) Purchase-money security interest in goods. A security interest in goods is a purchase-money security interest:

(1) to the extent that the goods are purchase-money collateral

with respect to that security interest;

(2) if the security interest is in inventory that is or was

purchase-money collateral, also to the extent that the

security interest secures a purchase-money obligation

incurred with respect to other inventory in which the secured

party holds or held a purchase-money security interest; and

(3) also to the extent that the security interest secures a

purchase-money obligation incurred with respect to software

in which the secured party holds or held a purchase-money

security interest.

(c) Purchase-money security interest in software. A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:

(1) the debtor acquired its interest in the software in an

integrated transaction in which it acquired an interest in

the goods; and

(2) the debtor acquired its interest in the software for the

principal purpose of using the software in the goods.

(d) Consignor's inventory purchase-money security interest. The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.

(e) Application of payment in non-consumer-goods transaction. In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:

(1) in accordance with any reasonable method of application to

which the parties agree;

(2) in the absence of the parties' agreement to a reasonable

method, in accordance with any intention of the obligor

manifested at or before the time of payment; or

(3) in the absence of an agreement to a reasonable method and a

timely manifestation of the obligor's intention, in the

following order:

(A) to obligations that are not secured; and

(B) if more than one obligation is secured, to obligations

secured by purchase-money security interests in the order

in which those obligations were incurred.

(f) No loss of status of purchase-money security interest in non-consumer-goods transaction. In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:

(1) the purchase-money collateral also secures an obligation that

is not a purchase-money obligation;

(2) collateral that is not purchase-money collateral also secures

the purchase-money obligation; or

(3) the purchase-money obligation has been renewed, refinanced,

consolidated, or restructured.

(g) Burden of proof in non-consumer-goods transaction. In a transaction other than a consumer-goods transaction, a secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.

(h) Non-consumer-goods transactions; no inference. The limitation of the rules in subsections (e), (f), and (g) to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.